Wednesday, August 11, 2021

false advertising as a workaround when municipal codes are copied?

International Code Council, Inc. v. UpCodes, Inc., 2021 WL 1236106, Nos. 17 Civ. 6261 (VM) & 20 Civ. 4316 (VM) (S.D.N.Y. Mar. 1, 2021) (presently on appeal)

ICC, a nonprofit that develops model codes for design/construction that are often adopted by government entities, sued for false advertising and unfair competition by UpCodes, alleging that they falsely claim to provide updated and accurate building codes on their website, when in fact the posted codes contain numerous errors. The court granted UpCodes’ motion for summary judgment.

ICC develops the codes through a consensus process and revises the codes regularly to reflect changes in the industry. ICC publishes revised I-Codes every three years, and it also publishes custom codes that reflect versions of the codes as adopted by states and local governments (the “Custom Codes”).

That’s costly. It sells I-Codes and Custom Codes through its online store, along with access to additional features through its premiumACCESS tool. “[I]ts primary funding source is the sale and licensing of publications containing its copyrighted works.”

Meanwhile, UpCodes is a for-profit that provides access to materials and tools of particular importance to building professionals, such as the state and local building codes that govern their projects. It allegedly sold or gave away unauthorized copies of the I-Codes and Custom Codes to both customers and prospective customers. In addition, while UpCodes claims its codes are up-to-date and contain integrated amendments, UpCodes’s codes allegedly actually contain numerous errors.

The complaint alleged that UpCode falsely asserted that the posted codes are “always up to date”; the UpCodes website said customers would “never work from outdated code,” “Your code library in one place, always up to date,” “Codes are organized by state and jurisdiction to provide a full understanding of the applicable codes for your project,” and “Understand all the requirements for your jurisdiction in one place”; on Twitter they claimed that their codes are “kept up-to-date with all the amendments integrated natively into the code”; it claimed that it provides the building industry with “ ‘a complete understanding of relevant material’ for their projects” and helps customers “surface the most critical code sections.”  ICC alleged reliance, including a customer review saying he was “much more comfortable knowing that my team is working off the most up-to-date codes.”

Likewise, ICC alleged that UpCodes falsely claimed: “Integrated Amendments: ... Never miss important requirements in your jurisdiction”; “UpCodes has the adopted codes as enacted by the state or local jurisdiction”; and “While some states provide integrated codes ... Where these are not provided, UpCodes has integrated the local amendments ....” Etc. On Twitter, UpCodes claimed that their copies of building codes are “kept up-to-date with all the amendments integrated natively into the code,” and separately that they had integrated “all 973 amendments” to the New Jersey 2018 codes.

However, ICC alleged errors in UpCodes’s Wyoming, Virginia, Oregon, and New Jersey codes. The errors include: posting the entire text of a model code as the state code when it wasn’t incorporated in its entirety (this meant, among other things, posting appendices for Wyoming that included Tsunami-Generated Flood Hazards); failing to incorporate certain amendments the states made to the codes; and failing to include appendices that were adopted.

Finally, UpCodes allegedly falsely claimed to be the “only source” of state amendments integrated into the model code, when in fact ICC also offers custom codes on its website.

Once upon a time, this was a copyright dispute. When the court ruled mostly in favor of UpCodes, though reserved for trial whether UpCodes infringed by copying “model codes as model codes or indiscriminately mingl[ing] the enacted portions of the model codes with portions not so enacted” as a factual matter, ICC filed this new suit, which the court consolidated.

Falsity as to amendment integration: UpCodes argued that its claims weren’t adequately alleged to be false, because “two dozen” errors among “tens of thousands” of Integrated Amendments wasn’t plausibly false or misleading. ICC responded that the errors it identified were merely representative, not an exhaustive list, and that two dozen errors among thousands was sufficient for falsity. The court declined to rely on “vague and conclusory” allegations about “additional, unidentified errors” under Twiqbal. But even if the complaint plausibly alleged more errors, the statements about amendment integration were neither literally nor impliedly false. ICC acknowledge that UpCodes does have “some” integrated amendments, so its claim to offer integrated amendments was not rendered false by (1) not having all the possible integrated amendments or (2) having errors in the integration; those things went to accuracy and completeness, as discussed below.

Falsity as to accuracy/completeness: UpCodes argued that its claims of accuracy and completeness were nonactionable puffery, not material, and not plausibly the source of injury because ICC has more errors than UpCodes’s website.

Even a statement that could in theory be proven true or false, and isn’t a vague statement of opinion, can be puffery if it is “an exaggerated, blustering, and boasting statement upon which no reasonable buyer would be justified in relying.” That was the case here. Claims to provide “a complete understanding of relevant material,” a code library that was “always up to date,” and that ensured that customers “never work from outdated code” were exactly the type of “exaggerated” and “boasting” statements “upon which no reasonable buyer would be justified in relying.” The court noted that numerous courts have treated the terms “accurate” and “complete” as puffing language, and putting them in the context of legal requirements didn’t change matters. Accuracy is important in building, but “codes are not static, nor are the laws that rely on them. As changes in law occur, some delay between the adoption of those changes, their dissemination to the public, and their publication on the UpCodes website is not only understandable, but expected.” Thus, no reasonable consumer would believe that “the codes are instantaneously updated and at all times error-free.” And the complaint didn’t plausibly allege “rampant” errors by plausibly alleging errors in the codes of four states.

This was further supported by a disclaimer on the UpCodes website (cited in the complaint, but that might not be necessary since the website is integral to the complaint), which expressly disclaims liability for “any errors or omissions in the information or content” on its website and expressly disclaims warranting that the services provided will be “error-free.” Although in the copyright decision, the court made reference to “rather surprising oversights,” UpCodes corrected issues when notified by ICC.

Falsity as to unique services: ICC’s own screenshot shows that UpCodes claims to be the only source of integrated codes only for “jurisdictions [that] do not provide integrated code books.” ICC didn’t allege that the statement as qualified was false.

The state-law claims thus failed too.

No comments: